Max India to divest 13.3% in hospital venture to Life Healthcare

Max India Ltd, the key promoter of North India-based Max Healthcare Institute Ltd, said on Tuesday that it will divest a 13.3% stake in the hospital chain in favour of its joint venture partner, South Africa’s Life Healthcare Group Pty Ltd. The equity dilution by Max India is to achieve parity in shareholding in Max Healthcare between Max India and Life Healthcare, and the South African partner will pay Rs. 397 crore for the 13.3% stake at Rs.67.50 per share, the company said in a note to the stock exchanges. Max Healthcare, which operates 12 hospitals in North India, has been valued at Rs.3,650 crore for the deal.

Max India holds a 65.86% stake in Max Healthcare at present, while Life Healthcare owns about 26%. Another key stakeholder in the healthcare service company is the International Finance Corporation (IFC) with a 7.5% stake; some employees hold about 0.64% equity. According to Max India’s note to BSE, IFC has the right to convert a portion of its outstanding optionally partially convertible preference shares and maintain its shareholding at 7.5% and/or exercise a proportionate tag along with Max India’s stake sale in Max Healthcare.

The stake divested by Max India and fresh issuance by Max Healthcare could vary at the time of actual closure of the transaction depending on IFC’s decision with respect to its options, it said. Life Healthcare is the second largest private hospital operator in South Africa. It currently owns and operates 63 hospitals with a total bed capacity of 8,322 across seven South African provinces and Botswana. It is also a leading provider of acute rehabilitation and mental health services in the country.

Max Healthcare had initiated an organic expansion by launching four new hospitals in the Delhi-National Capital Region and North India to nearly double its capacity to almost 2,000 beds last year. The company’s revenue in the year ended March 2014 was Rs.1,407 crore, registering a growth of 22% over the previous year. The stake dilution in favour of Life Healthcare is subject to finalization and execution of definitive agreements and receipt of necessary regulatory approvals, according to Max India’s statement on Tuesday. Max India shares ended at Rs.317.50 on BSE, down 1.04% from previous close, while the benchmark Sensex index rose 1.21% to 26,025.80 points.